The south-west is generally regarded as the breeding ground for German inventiveness. Anyone who drives to work in the morning, eats a pretzel on the way and files their documents in the office using Leitz folders can only do these things thanks to the ingenuity of Swabian inventors.

But it's not as if our everyday lives aren't largely determined by East German innovation as well. If coffee accompanies a pretzel from the good old filter machine, then Dresden inventor Melitta Benz had a hand in it. If you want to prevent coffee breath, use toothpaste and mouthwash, which were also developed in Saxony. The SLR camera and even publications such as this newspaper also have their origins in the Free State: the world's first daily newspaper was published in Leipzig in 1650.

Saxony's drive to research has continued to the present day – and has made the state one of the most important technology locations in Germany. With its ten Fraunhofer institutes, facilities, and branches, Dresden is considered the Fraunhofer capital. In total, the Free State has almost 70 non-university research institutes and 22 universities – one of which, the Technical University of Dresden, even bears the title of „University of Excellence“.

The region has made a name for itself in the field of microelectronics in particular. Every third chip produced in Europe today comes from „Silicon Saxony“, and the industry recently employed around 70,000 people. In order to benefit from the existing know-how and network effects, numerous international players such as Globalfoundries, Infineon and Bosch have set up their own factories in Dresden. In the near future, TSMC, the world's largest semiconductor manufacturer, plans to join them.

The problem is that the big players all come from outside the region – a situation that the federal state intends to change in the future. To this end, it is also focusing on its start-up scene, which proved to be particularly active last year according to figures from the Start-up Association. With 91 newly founded start-ups, no other federal state saw such a significant increase compared to the previous year as Saxony. In terms of start-ups per capita, the Free State thus moved up from 11th to 8th place in the ranking of federal states.

This comes as no surprise to Sören Schuster, Head of TGFS Technologiegründerfonds Sachsen, a publicly and privately financed equity investor for tech-oriented Saxon start-ups. „The fact that the number of start-ups in the VC-relevant sector has risen so significantly is the result of continuous, long-term work by the ecosystem,“ he says. „Since the end of the 1990s, founders in Saxony have been systematically motivated, given entrepreneurial training and also supported with infrastructure.“

In fact, there is a huge range of support on offer for aspiring Saxon entrepreneurs. Starting with the promotion of start-up consultations, grants, and scholarships to secure living expenses and support for the market launch of innovative products, through to equity investments, guarantees, investment subsidies, and help with networking with private investors, the Free State offers a wide range of start-up assistance to strengthen the ecosystem. The underlying goal is ambitious: according to its innovation strategy, Saxony aims to become the „flagship“ in terms of knowledge and technology transfer and a „showcase state“ for innovation-supported regional development and industrial transformation by 2030.

The state has already produced a certain number of shooting stars with this approach – and in very different sectors. One example is the Chemnitz-based software start-up Staffbase, which two years ago was the only representative of the new federal states to officially become a unicorn, meaning it was valued by investors at more than 1 billion euros. The company operates a digital platform for employee communication and currently employs around 760 people worldwide.

There is also the Dresden-based hydrogen start-up Sunfire, which recently raised 215 million euros in venture capital in a Series E financing round with its electrolysers for industry. This sum amounts to more than the entire Saxon start-up scene raised in one go last year. And then there is the robot start-up Wandelbots, also from Dresden, which raised 84 million dollars just two years ago. However, around 30% of the employees at the latter company recently had to leave. The start-up is now concentrating exclusively on the software sector, which ties up fewer financial resources.

The capital-intensive and often lengthy development of hardware-heavy technologies is one reason why start-ups from Saxony sometimes still find it difficult to establish and finance themselves. In the semiconductor sector, for example, expensive infrastructure such as laboratories, machines, or clean rooms are required – things that cannot simply be ordered from Amazon for a few thousand euros. „That alone makes it difficult for many people to set up a company out of their university,“ says Schuster.

According to the TGFS Managing Director, the already difficult cost issue has been exacerbated by another trend in recent years: „The emergence of remote work has led to a massive increase in costs for IT specialists based in Saxony – simply because they can now also be hired by financially strong companies in other parts of Germany.“ Salaries for programmers, for example, have doubled over the past eight years as a result. „That's quite considerable,“ says Schuster.

The fact that there are still comparatively few private venture capitalists in the region does not make things any easier. Nor does the fact that the AfD, which is classified as ascertained right-wing extremist in the federal state, could become the strongest force in the upcoming state elections and make it even more difficult to attract foreign specialists. In 2022, the startup association had already described the proportion of international employees in the Saxon ecosystem as „conspicuously low“. At that time, it was 13% – in Berlin it was 41%.

In a recent survey by the association, only 36% of participating founders rated Saxony's appeal as a location for talent as positive. Only access to capital was rated as even more difficult. In contrast, the ecosystem received the best rating for its proximity to universities – an aspect that international investors also attach great importance to. In this aspect, as well as in the overall assessment of all aspects, Saxony scored even better than Germany as a whole.

Politically, however, the state is optimistic: in 2030, the state does not only want to be a flagship for knowledge transfer. No, according to the innovation strategy, Saxony should be „synonymous with an outstanding level of education, open-mindedness and tolerance“.